SOURCE: VeriSign, Inc.
January 27, 2011 16:05 ET
Verisign Reports 10% Year-Over-Year Revenue Growth in 2010
DULLES, VA--(Marketwire - January 27, 2011) - VeriSign, Inc. (NASDAQ: VRSN), the trusted
provider of Internet infrastructure services for the networked world, today
reported financial results for the fourth quarter of 2010 and year ended
December 31, 2010.
Fourth Quarter GAAP Financial Results
VeriSign, Inc. and subsidiaries ("Verisign") reported revenue of $179
million for the fourth quarter of 2010, up 4% from the prior quarter and up
13% from the same quarter in 2009. Verisign reported net loss attributable
to Verisign stockholders of $(41) million and net loss per share
attributable to Verisign stockholders of $(0.23) on a diluted basis for the
fourth quarter of 2010, reflecting a $109 million payment of contingent
interest to holders of the 3.25% Junior Subordinated Convertible Debentures
due 2037 ("Convertible Debentures") in connection with a special dividend
in December. This compared to net income attributable to Verisign
stockholders of $92 million and earnings per share attributable to Verisign
stockholders of $0.48 on a diluted basis in the same quarter in 2009. The
operating margin was 37.7% for the fourth quarter of 2010 compared to 29.9%
for the same quarter in 2009.
Because the company has not fully completed the tax provision calculation
process, tax provisions for both the fourth quarter and full year 2010 are
still preliminary and therefore GAAP net income/loss and GAAP earnings/loss
per share for these periods are also preliminary. Final tax provisions,
GAAP net income/loss, and GAAP earnings/loss per share will be updated in
the Annual Report on Form 10-K for the year ended December 31, 2010 to be
filed with the SEC and may differ materially from the amounts reported
above.
Fourth Quarter Non-GAAP Financial Results
Verisign reported net income attributable to Verisign stockholders of $54
million and earnings per share attributable to Verisign stockholders of
$0.31 on a diluted basis for the fourth quarter of 2010, compared to net
income attributable to Verisign stockholders of $33 million and earnings
per share attributable to Verisign stockholders of $0.17 on a diluted basis
in the same quarter in 2009. The operating margin was 44.3% for the fourth
quarter of 2010 compared to 35.4% for the same quarter in 2009. A table
reconciling the GAAP to the non-GAAP results (which excludes items
described below) is appended to this release.
"We are pleased with our performance this quarter, capping a strong year of
execution in which the business continued to benefit from favorable
Internet trends," said Mark McLaughlin, president and chief executive
officer of Verisign. "In 2011, we will continue to provide exceptional
service to our customers and help them grow by providing services that
address the reliability and availability demands of increased Internet
usage and cloud computing."
2010 GAAP Financial Results
For the year ended December 31, 2010, Verisign reported revenue of $681
million, up 10% from $616 million in 2009. Verisign reported net income
attributable to Verisign stockholders of $831 million and earnings per
share attributable to Verisign stockholders of $4.64 on a diluted basis,
reflecting a net gain of $726 million, net of tax of $254 million, on the
sale of the Authentication Services business. This compared to net income
attributable to Verisign stockholders of $246 million and earnings per
share attributable to Verisign stockholders of $1.28 on a diluted basis in
2009. The operating margin for 2010 was 34.1% compared to 26.0% in 2009.
2010 Non-GAAP Financial Results
Verisign reported net income attributable to Verisign stockholders of $185
million and earnings per share attributable to Verisign stockholders of
$1.03 on a diluted basis, compared to net income attributable to Verisign
stockholders of $124 million and earnings per share attributable to
Verisign stockholders of $0.64 on a diluted basis in 2009. The operating
margin for 2010 was 41.8% compared to 33.3% in 2009. A table reconciling
the GAAP to the non-GAAP results (which excludes items described below) is
appended to this release.
"Our key long-term financial priorities have been growth and increased
operating leverage, and we made substantial progress on both in 2010 due to
our continued strategic focus, execution and operating discipline," said
Brian Robins, chief financial officer of Verisign.
Financial Highlights
-- On December 10, Verisign announced a special cash dividend of $3.00
per share of its common stock or $518 million that was paid on
December 28, 2010 to shareholders of record at the close of business
on December 20, 2010. In addition, a contingent interest payment
totaling $109 million was paid on December 28, 2010 to holders of
record of Verisign's Convertible Debentures at the close of business
on December 20, 2010.
-- During 2010, Verisign repurchased approximately 16 million shares for
a cost of approximately $438 million. This included the repurchase of
0.4 million shares in the fourth quarter for $14 million to partially
offset dilution.
-- Upon wind-down in the fourth quarter of the operations of the Content
Portal Services ("CPS") business, and upon the sale of the
Authentication Services business during the year, historical
operations for both businesses were reclassified to discontinued
operations for all periods presented.
-- Verisign ended the fourth quarter with Cash, Cash Equivalents,
Marketable Securities and Restricted Cash of $2.063 billion, a
decrease of $488 million from the prior quarter and an increase of
$585 million from the same quarter in 2009.
-- Cash flow from operations on a consolidated basis was $47 million
for the fourth quarter and $215 million for the full year. Excess
tax benefits of $132 million for the full year that are associated
with stock-based compensation were classified as financing cash flows.
-- Deferred revenues from continuing operations on December 31, 2010
totaled $663 million, an increase of $9 million from the prior quarter
and $77 million from the same quarter in 2009.
-- Capital expenditures, on a consolidated basis, were $12 million in the
fourth quarter and $81 million for the full year. For the full year,
approximately 25% of capital expenditures were related to the
Authentication Services business prior to its sale.
Business and Corporate Highlights
-- Verisign Registry Services ended the quarter with approximately
105.2 million active domain names in the adjusted zone for .com and
.net, representing a 9% increase year-over-year.
-- In the fourth quarter, Verisign added 7.6 million new domain name
registrations, representing a 4% increase year-over-year.
-- During the fourth quarter, Verisign deployed Domain Name System
Security Extensions (DNSSEC) in the .net domain to provide origin
authentication of DNS data, authenticated denial of existence, and
data integrity.
-- Over the course of 2010, Verisign processed more than 22 trillion
total queries through its infrastructure, compared to 18 trillion in
2009. Verisign experienced an average daily query load of 61 billion
during the fourth quarter, compared to 66 billion in the prior
quarter and 52 billion in the same quarter in 2009.
-- Verisign ended the fourth quarter of 2010 with approximately 1,050
employees, compared to 1,100 employees at the end of the prior quarter.
Non-GAAP Items
Non-GAAP financial results exclude the following items that are included
under GAAP: discontinued operations, stock-based compensation, amortization
of other intangible assets, impairments of goodwill and other intangible
assets, restructuring costs, contingent interest payment to holders of our
Convertible Debentures, and non-cash interest expense. Non-GAAP financial
information is also adjusted for a 30% tax rate which differs from the GAAP
tax rate. A table reconciling the GAAP to non-GAAP operating income and
net income attributable to Verisign stockholders is appended to this
release. All
non-GAAP figures for each period presented herein have been conformed to
exclude the foregoing items under GAAP. Prior disclosures of non-GAAP
figures do not exclude the same items and as such should not be used for
comparison purposes.
Today's Conference Call
Verisign will host a live teleconference call today at 4:30 p.m. (EST) to
review the fourth quarter and full year results. The call will be
accessible by direct dial at (888) 676-VRSN (US) or (913) 312-0821
(international). A listen-only live web cast and accompanying slide
presentation of the earnings conference call will also be available on the
Investor Relations section of the Verisign website at www.verisigninc.com.
A telephone replay of this call will remain available at (888) 203-1112 or
(719) 457-0820 (passcode: 1564139) for one week after the conference call.
This press release and the financial information discussed on today's
conference call are available on the Investor Relations section of the
Verisign website at www.verisigninc.com.
About Verisign
VeriSign, Inc. (NASDAQ: VRSN) is the trusted provider of Internet
infrastructure services for the networked world. Billions of times each
day, Verisign helps companies and consumers all over the world connect
online with confidence. Additional news and information about the company
is available at www.verisigninc.com.
VRSNF
Statements in this announcement other than historical data and information
constitute forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 as amended and Section 21E of the Securities
Exchange Act of 1934 as amended. These statements involve risks and
uncertainties that could cause Verisign's actual results to differ
materially from those stated or implied by such forward-looking statements.
The potential risks and uncertainties include, among others, the
uncertainty of future revenue and profitability and potential fluctuations
in quarterly operating results due to such factors as increasing
competition, pricing pressure from competing services offered at prices
below our prices and changes in marketing practices including those of
third-party registrars; the sluggish economic recovery; challenges to
ongoing privatization of Internet administration; the outcome of legal or
other challenges resulting from our activities or the activities of
registrars or registrants; new or existing governmental laws and
regulations; changes in customer behavior, Internet platforms and
web-browsing patterns; the inability of Verisign to successfully develop
and market new services; the uncertainty of whether our new services will
achieve market acceptance or result in any revenues; system interruptions;
security breaches; attacks on the Internet by hackers, viruses, or
intentional acts of vandalism; the uncertainty of the expense and duration
of transition services and requests for indemnification relating to
completed divestitures; and the uncertainty of whether Project Apollo will
achieve its stated objectives. More information about potential factors
that could affect the company's business and financial results is included
in Verisign's filings with the Securities and Exchange Commission,
including in the Company's Annual Report on Form 10-K for the year ended
December 31, 2009, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K. Verisign undertakes no obligation to update any of the
forward-looking statements after the date of this announcement.
VERISIGN, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
December 31, December 31,
2010 2009
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,559,628 $ 1,477,166
Marketable securities 501,238 185
Accounts receivable, net 14,874 63,133
Prepaid expenses and other current assets 102,217 168,574
------------ ------------
Total current assets 2,177,957 1,709,058
------------ ------------
Property and equipment, net 190,319 403,821
Goodwill 52,527 289,980
Other intangible assets, net 2,619 22,420
Other assets 20,584 44,865
------------ ------------
Total long-term assets 266,049 761,086
------------ ------------
Total assets $ 2,444,006 $ 2,470,144
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 195,235 $ 243,967
Deferred revenues 457,478 642,507
------------ ------------
Total current liabilities 652,713 886,474
------------ ------------
Long-term deferred revenues 205,560 245,734
Convertible debentures, including contingent
interest derivative 581,626 574,378
Long-term deferred tax liabilities 309,696 144,777
Other long-term liabilities 17,981 20,117
------------ ------------
Total long-term liabilities 1,114,863 985,006
------------ ------------
Total liabilities 1,767,576 1,871,480
------------ ------------
Commitments and contingencies
Stockholders' equity:
Verisign stockholders' equity:
Preferred stock -- par value $.001 per share;
Authorized shares: 5,000,000;
Issued and outstanding shares: none - -
Common stock -- par value $.001 per share;
Authorized shares: 1,000,000,000;
Issued and outstanding shares: 172,736,281
excluding 140,576,600 held in treasury, at
December 31, 2010; and 183,299,463,
excluding 124,434,684 held in treasury,
at December 31, 2009 313 308
Additional paid-in capital 21,040,919 21,736,209
Accumulated deficit (20,363,468) (21,194,435)
Accumulated other comprehensive (loss)
income (1,334) 7,659
------------ ------------
Total Verisign stockholders' equity 676,430 549,741
Noncontrolling interest in subsidiary - 48,923
------------ ------------
Total stockholders' equity 676,430 598,664
------------ ------------
Total liabilities and stockholders' equity $ 2,444,006 $ 2,470,144
============ ============
VERISIGN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Revenues $ 178,829 $ 158,741 $ 680,578 $ 615,947
--------- --------- --------- ---------
Costs and expenses:
Cost of revenues 38,265 40,063 156,676 166,705
Sales and marketing 20,529 21,293 83,390 75,348
Research and development 13,181 12,610 53,664 52,364
General and administrative 36,549 35,707 137,704 146,531
Restructuring, impairment and
other charges, net 2,819 1,599 16,861 15,041
--------- --------- --------- ---------
Total costs and expenses 111,343 111,272 448,295 455,989
--------- --------- --------- ---------
Operating income 67,486 47,469 232,283 159,958
Other loss, net (114,144) (11,094) (136,929) (35,406)
--------- --------- --------- ---------
(Loss) income from continuing
operations before income taxes (46,658) 36,375 95,354 124,552
Income tax benefit (expense) 14,991 (5,007) (25,322) (32,935)
--------- --------- --------- ---------
(Loss) income from continuing
operations, net of tax (31,667) 31,368 70,032 91,617
(Loss) income from discontinued
operations, net of tax (8,838) 61,985 763,822 157,622
--------- --------- --------- ---------
Net (loss) income (40,505) 93,353 833,854 249,239
Less: Income from discontinued
operations, net of tax,
attributable to noncontrolling
interest in subsidiary - (1,305) (2,887) (3,686)
--------- --------- --------- ---------
Net (loss) income
attributable to Verisign
stockholders $ (40,505) $ 92,048 $ 830,967 $ 245,553
========= ========= ========= =========
Basic (loss) income per share
attributable to Verisign
stockholders from:
Continuing operations $ (0.18) $ 0.17 $ 0.39 $ 0.48
Discontinued operations (0.05) 0.32 4.29 0.80
--------- --------- --------- ---------
Net (loss) income $ (0.23) $ 0.49 $ 4.68 $ 1.28
========= ========= ========= =========
Diluted (loss) income per share
attributable to Verisign
stockholders from:
Continuing operations $ (0.18) $ 0.16 $ 0.39 $ 0.48
Discontinued operations (0.05) 0.32 4.25 0.80
--------- --------- --------- ---------
Net (loss) income $ (0.23) $ 0.48 $ 4.64 $ 1.28
========= ========= ========= =========
Shares used to compute net
income per share attributable
to Verisign stockholders:
Basic 172,472 189,724 177,534 191,821
========= ========= ========= =========
Diluted 172,472 190,617 178,965 192,575
========= ========= ========= =========
Amounts attributable to
Verisign stockholders:
(Loss) Income from
continuing operations,
net of tax $ (31,667) $ 31,368 $ 70,032 $ 91,617
(Loss) income from
discontinued
operations, net of tax (8,838) 60,680 760,935 153,936
--------- --------- --------- ---------
Net (loss) income
attributable to Verisign
stockholders $ (40,505) $ 92,048 $ 830,967 $ 245,553
========= ========= ========= =========
VERISIGN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(In thousands, except per share data)
(Unaudited)
The following table presents stock-based compensation:
Three Months Ended Year Ended
December 31, December 31,
--------------------- ---------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
(In thousands)
Stock-based compensation:
Cost of revenues $ 1,217 $ 884 $ 4,473 $ 3,649
Sales and marketing 1,454 918 4,419 3,250
Research and development 1,178 759 4,989 3,145
General and administrative 4,707 4,316 20,136 18,912
Restructuring and other
charges, net 1,277 39 2,321 630
---------- ---------- ---------- ----------
Stock-based compensation for
continuing operations 9,833 6,916 36,338 29,586
Discontinued operations 144 4,845 15,840 21,580
---------- ---------- ---------- ----------
Total stock-based compensation $ 9,977 $ 11,761 $ 52,178 $ 51,166
========== ========== ========== ==========
VERISIGN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Year Ended December 31,
------------------------
2010 2009
----------- -----------
Cash flows from operating activities:
Net income $ 833,854 $ 249,239
Adjustments to reconcile net income to net cash
provided by operating activities:
Net gain on sale of discontinued operations,
net of tax (725,254) (28,320)
Depreciation of property and equipment 62,605 74,067
Amortization of other intangible assets 5,050 12,199
Stock-based compensation 52,178 51,166
Loss on sale and impairment of other
long-lived assets - 12,481
Excess tax benefit associated with stock-based
compensation (131,926) (25,880)
Other, net 9,474 (3,567)
Changes in operating assets and liabilities,
excluding the effects of acquisitions and
divestitures:
Accounts receivable 13,147 25,798
Prepaid expenses and other assets (19,105) (47,418)
Accounts payable and accrued liabilities 34,952 34,545
Deferred revenues 80,231 40,881
----------- -----------
Net cash provided by operating activities 215,206 395,191
----------- -----------
Cash flows from investing activities:
Proceeds received from divestiture of businesses,
net of cash contributed and transaction costs 1,162,306 469,380
Proceeds from maturities and sales of marketable
securities and investments 313,817 129,479
Purchases of marketable securities and
investments (787,718) (1,150)
Purchases of property and equipment (80,527) (116,876)
Proceeds from sale of property and equipment - 6,064
Other investing activities (4,788) (2,442)
----------- -----------
Net cash provided by investing activities 603,090 484,455
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock from
option exercises and employee stock purchase
plans 92,510 36,204
Repurchases of common stock (449,749) (260,571)
Payment of dividends to stockholders (518,217) -
Excess tax benefit associated with stock-based
compensation 131,926 25,880
Other financing activities (1,744) 493
----------- -----------
Net cash used in financing activities (745,274) (197,994)
----------- -----------
Effect of exchange rate changes on cash and cash
equivalents 9,440 6,446
----------- -----------
Net increase in cash and cash equivalents 82,462 688,098
Cash and cash equivalents at beginning of period 1,477,166 789,068
----------- -----------
Cash and cash equivalents at end of period $ 1,559,628 $ 1,477,166
=========== ===========
Supplemental cash flow disclosures:
Cash paid for interest, net of capitalized
interest $ 148,870 $ 39,256
=========== ===========
Cash paid for income taxes, net of refunds
received $ 8,502 $ 21,881
=========== ===========
(Payable) receivable to/from purchasers of
divested businesses $ (4,250) $ 15,780
=========== ===========
VERISIGN, INC.
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
(Unaudited)
Three Months Ended Three Months Ended
December 31, 2010 December 31, 2009
------------------------ ------------------------
Net Income Net Income
attributable attributable
Operating to Verisign Operating to Verisign
Income stockholders Income stockholders
---------- ------------ ---------- ------------
GAAP as reported $ 67,486 $ (40,505) $ 47,469 $ 92,048
Discontinued operations 8,838 (60,680)
Adjustments:
Stock-based
compensation 8,556 8,556 6,877 6,877
Amortization of other
intangible assets 324 324 319 319
Restructuring costs 2,819 2,819 1,599 1,599
Contingent interest
payment to holders of
Convertible Debentures 109,113 -
Non-cash interest
expense 2,294 1,718
Tax adjustment (37,926) (9,059)
---------- ------------ ---------- ------------
Non-GAAP as adjusted $ 79,185 $ 53,513 $ 56,264 $ 32,822
========== ============ ========== ============
Diluted shares 174,014 190,617
Per diluted share,
non-GAAP as adjusted $ 0.31 $ 0.17
============ ============
VeriSign provides quarterly and annual financial statements that are
prepared in accordance with generally accepted accounting principles
(GAAP). Along with this information, we typically disclose and discuss
certain non-GAAP financial information in our quarterly earnings release,
on investor conference calls and during investor conferences and related
events. This non-GAAP financial information does not include the following
types of financial measures that are included in GAAP: discontinued
operations, stock-based compensation, amortization of other intangible
assets, impairments of goodwill and other intangible assets, restructuring
costs, contingent interest payment to holders of our Convertible
Debentures, and non-cash interest expense. Non-GAAP financial information
is also adjusted for a 30% tax rate which differs from the GAAP tax rate.
All non-GAAP figures for each period presented above have been conformed to
exclude the foregoing items under GAAP. Prior disclosures of non-GAAP
figures do not exclude the same items and as such should not be used for
comparison purposes.
Management believes that this non-GAAP financial data supplements our GAAP
financial data by providing investors with additional information that
allows them to have a clearer picture of the Company's operations. The
presentation of this additional information is not meant to be considered
in isolation nor as a substitute for results prepared in accordance with
GAAP. We believe that the non-GAAP information enhances the investors'
overall understanding of our financial performance and the comparability of
the company's operating results from period to period. Above, we have
provided a reconciliation of the non-GAAP financial information that we
provide each quarter with the comparable financial information reported in
accordance with GAAP for the given period.
SUPPLEMENTAL FINANCIAL INFORMATION
Three Months Ended
---------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2010 2010 2010 2010 2009
------------ ------------ ------------ ------------ -----------
Revenues $ 178,829 $ 172,286 $ 167,881 $ 161,582 $ 158,741
============ ============ ============ ============ ===========
VERISIGN, INC.
STATEMENTS OF OPERATIONS RECONCILIATION
(In thousands, except per share data)
(Unaudited)
Year Ended Year Ended
December 31, 2010 December 31, 2009
------------------------ ------------------------
Net Income Net Income
attributable attributable
Operating to Verisign Operating to Verisign
Income stockholders Income stockholders
---------- ------------ ---------- ------------
GAAP as reported $ 232,283 $ 830,967 $ 159,958 $ 245,553
Discontinued operations (760,935) $ (153,936)
Adjustments:
Stock-based
compensation 34,017 34,017 28,956 28,956
Amortization of other
intangible assets 1,293 1,293 1,195 1,195
Impairment of other
intangible asset - - 9,684 9,684
Restructuring costs 16,861 16,861 5,357 5,357
Contingent interest
payment to holders of
Convertible
Debentures 109,113 -
Non-cash interest
expense 7,929 6,726
Tax adjustment (54,049) (20,006)
---------- ------------ ---------- ------------
Non-GAAP as adjusted $ 284,454 $ 185,196 $ 205,150 $ 123,529
========== ============ ========== ============
Diluted shares 178,965 192,575
Per diluted share,
non-GAAP as adjusted $ 1.03 $ 0.64
============ ============
VeriSign provides quarterly and annual financial statements that are
prepared in accordance with generally accepted accounting principles
(GAAP). Along with this information, we typically disclose and discuss
certain non-GAAP financial information in our quarterly earnings release,
on investor conference calls and during investor conferences and related
events. This non-GAAP financial information does not include the following
types of financial measures that are included in GAAP: discontinued
operations, stock-based compensation, amortization of other intangible
assets, impairments of goodwill and other intangible assets, restructuring
costs, contingent interest payment to holders of our Convertible Debentures
and non-cash interest expense. Non-GAAP financial information is also
adjusted for a 30% tax rate which differs from the GAAP tax rate. All
non-GAAP figures for each period presented above have been conformed to
exclude the foregoing items under GAAP. Prior disclosures of non-GAAP
figures do not exclude the same items and as such should not be used for
comparison purposes.
Management believes that this non-GAAP financial data supplements our GAAP
financial data by providing investors with additional information that
allows them to have a clearer picture of the Company's operations. The
presentation of this additional information is not meant to be considered
in isolation nor as a substitute for results prepared in accordance with
GAAP. We believe that the non-GAAP information enhances the investors'
overall understanding of our financial performance and the comparability of
the company's operating results from period to period. Above, we have
provided a reconciliation of the non-GAAP financial information that we
provide each quarter with the comparable financial information reported in
accordance with GAAP for the given period.
SUPPLEMENTAL FINANCIAL INFORMATION
Year Ended
---------------------------
December 31, December 31,
2010 2009
------------- -------------
Revenues $ 680,578 $ 615,947
============= =============